Increased Risks For Twitter May Already Be Baked Into Shares

Twitter Inc TWTR reported broadly in-line results, but its guidance missed expectations. SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating for the company, while reducing the price target from $20 to $18. The analyst commented that while user growth had been a concern area, it now seems that monetization will also be under pressure until new products are launched in 2H.

Twitter reported its Q1 MAUs and EBITDA ahead of expectations, while revenue came in at the low end of the projected range. The company’s 2Q guidance implies a sharp downturn in revenue growth, as well as EBITDA margin contraction, analyst Robert Peck said.

Same Thesis, But Delayed

“When we upgraded the stock, we predicated it on a stabilization of users (which occurred this Q) and a series of expected catalysts…Many of these catalysts haven't come to fruition or have been delayed, pushing our timing into later this year,” Peck wrote.

Referring to Twitter’s current status and upcoming catalysts, the analyst mentioned that several parameters [like user metrics, monetization, product, and financials] reflect continued and significant execution challenges. He added, “These items are at the heart of the challenge in Twitter’s business transition.”

Although the delay is disappointing, investors already seem to be aware of the increased risks. With Twitter’s shares already pricing in the risks, “we are cautiously optimistic,” Peck mentioned. The EPS estimates for 2016 and 2017 have been reduced from $0.67 to $0.57 and from $0.87 to $0.75, respectively.